⁠Capital Employed
Interesting idea by @HiddenRockCap on Mammoth Energy Services $TUSK

Deep value idea with majority of market value in net cash.

Full write-up here 👇

https://t.co/rKp8wFMY9B
tweet

⁠Startup Archive
Flexport CEO Ryan Petersen explains why your initial vision for your company is probably wrong

When Ryan first applied to Y Combinator he wanted Flexport to be “TurboTax for customs.” But that vision changed a lot. As Ryan explains:

“The more you learn and the more customers you talk to and the more vendors you talk to, the more you realize how screwed up the world is in this space. Then [the vision] actually gets bigger and bigger and keeps expanding.”

Y Combinator CEO Garry Tan says this is a common pattern he sees in startups too:

“There’s a misconception that you wake up from a haze and you’re like ‘This is it. This is the vision.” But the story is actually ‘Oh here’s this thing that I know I can solve.’ And then once you solve it and people really like it, it sort of expands and expands.”

Ryan concludes:

“If a founder is too certain of exactly what the vision is and what the product’s going to look like and how it’s all going to work, they’re probably wrong. The world is super messy.”

Video source: @garrytan (2022)
tweet

⁠Stock Analysis Compilation
Praetorian Capital on St. Joe $JOE US

Thesis: St. Joe’s massive land holdings and high growth potential in a booming region position it as a key beneficiary of migration and inflation-driven appreciation

(Extract from their Q2 letter) https://t.co/pWhYuMXKjO
tweet

⁠Librarian Capital
Today, in a few hours https://t.co/MqJQC01vSo
tweet

⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $INTU 🧘🏽‍♂️

•NTM P/E Ratio: 31.89x
•10-Year Mean: 33.66x

•NTM FCF Yield: 3.44%
•10-Year Mean: 3.70%

As you can see, $INTU appears to be trading somewhere near fair value & over fair value

Going forward, investors can receive ~5% MORE in earnings per share & ~7# LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $INTU is a good business

BALANCE SHEET✅
•Cash & Short-Term Inv: $4.07B
•Long-Term Debt: $5.54B

$INTU has a strong balance sheet, an A- S&P Credit Rating & 20x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 43.9%
•2020: 25.2%
•2021: 19.7%
•2022: 10.7%
•2023: 13.1%
•2024: 15.5%

RETURN ON EQUITY✅
•2019: 47.4%
•2020: 41.2%
•2021: 27.5%
•2022: 15.7%
•2023: 14.1%
•2024: 16.6%

$INTU has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2014: $4.51
•2024: $16.29B
•CAGR: 13.70%

FREE CASH FLOW✅*
•2014: $1.34B
•2024: $4.69B
•CAGR: 13.34%

NORMALIZED EPS✅
•2014: $16.94
•2024: $3.49
•CAGR: 17.11%

PAID DIVIDENDS✅
•2014: $0.76
•2024: $3.60
•CAGR: 16.82%

SHARE BUYBACKS🆗
•2014 Shares Outstanding: 291.00M
•LTM Shares Outstanding: 284.00M

By reducing its shares outstanding ~2.4%, $INTU increased its EPS by ~2.5% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 79.6%
•LTM Operating Margins: 23.7%
•LTM Net Income Margins: 18.2%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~5% MORE in EPS & ~7% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $INTU has to grow earnings at a 15.95% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be less than the (15.95%) required growth rate:

2025E: $19.34 (14.1% YoY) *FY Jul
2026E: $22.24 (15.0% YoY)
2027E: $25.41 (14.3% YoY)

$INTU has a great track record of meeting analyst estimates ~2 years out, but let’s assume $INTU ends 2027 with $25.41 in EPS & see its CAGR potential assuming different multiples:

32x P/E: $708.16💵 … ~10.9% CAGR

31x P/E: $686.03💵 … ~9.6% CAGR

30x P/E: $663.90💵 … ~8.4% CAGR

29x P/E: $641.77💵 … ~7.1% CAGR

While it’s certainly reasonable for $INTU to trade for 32x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety (given today’s $619💵 share price)

I’d consider $INTU a strong purchase with a substantial margin of safety closer to $570💵, or ~29.40 NTM earnings (~8% below todays price)

Given today’s estimates, at $570💵 I can reasonably expect ~10.3% CAGR while assuming a 29x end multiple

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
tweet

⁠Quiver Quantitative
BREAKING: Representative Jonathan Jackson has bought stock in the defense contractor General Dynamics, $GD.

Jackson sits on the House Committee on Foreign Affairs. https://t.co/V56snQ2qpL
tweet

⁠Value Spotlight (Andrew Sather)
ROIC Tutorial: Are airlines still capital inefficient?

How to check capital intensity w/ Invested Capital ($DAL) https://t.co/QxSd6Ykl6e
tweet

⁠Quiver Quantitative
Nancy Pelosi has made $1.6M in the stock market so far this morning, per our estimates: https://t.co/oraqK971Ps
tweet

⁠Stock Analysis Compilation
Diamond Hill on Astrana Health $ASTH US

Thesis: Astrana Health's focus on value-based care and its growth potential in new markets make it a strong long-term investment.

(Extract from their Q2 letter) https://t.co/idHGMdgoqB
tweet